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Fed likely to raise rate by 25 bps this week
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JPMorgan buys most of First Republic Bank's assets
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U.S. manufacturing, construction spending improve
(Updates prices)
By Deep Kaushik Vakil
May 1 (Reuters) - Gold prices edged lower on Monday as
the dollar rose after better-than-expected U.S. manufacturing
data, while markets await the Federal Reserve's interest rate
hike decision this week.
Spot gold was down 0.4% at $1,982.20 per ounce by
1:55 p.m. ET (1755 GMT), reversing nearly 1% gains made earlier
in the session.
U.S. gold futures settled down 0.3% at $1,992.20.
U.S. manufacturing pulled off a three-year low in April as
new orders improved slightly and employment rebounded, while
construction spending increased more than expected in March,
boosted by investments in nonresidential structures.
The stronger-than-expected data knocked down the metals
market and boosted the dollar a little bit, said Jim Wyckoff,
senior analyst at Kitco Metals.
The dollar index gained 0.5%, making greenback-priced
bullion less attractive for overseas buyers. In early U.S. trading hours, gold prices rebounded to touch
$2,005 as traders took stock of news that JPMorgan Chase & Co would buy most of First Republic Bank's assets
after regulators seized the troubled lender over the weekend.
"The move was definitely premature ... we used some of that
opportunity to try and capitalize on taking some positions off
on that move upwards," said Phillip Streible, chief market
strategist at Blue Line Futures, in Chicago.
The Federal Open Market Committee (FOMC) will meet on May
2-3, and markets largely expect a 25-basis point interest rate
hike. Investors will also focus on Fed Chair Jerome Powell's press
conference to assess if the central bank commentary pushes back
market expectations of rate cuts before the year-end amid the
recent banking turmoil and threats of an imminent recession.
While gold is known as an inflation hedge, rising rates tend
to lower demand for zero-yielding bullion.
Spot silver fell 0.2% to about $25 per ounce,
platinum lost 2.2% to $1,050.83, while palladium shed 3.2% to $1,452.57.
(Reporting by Deep Vakil in Bengaluru; Editing by Shilpi
Majumdar and Shounak Dasgupta)
